Microstrategy is one of the largest hodlers of Bitcoin and is led by Micahel Saylor, an avid supporter of the same. They have over 125,000 BTC in their portfolio, but it seems that’s not enough as Microstrategy takes $205 million in BTC-backed loans to buy more. It’s been almost 2 months that they haven’t made any purchases, so I guess it was time.
Microstrategy plans to buy more Bitcoins
The Bitcoin-backed loan was acquired from Silvergate Bank. In this loan, the collateral is the Bitcoin that Microstrategy holds in its account. This is the first time we are seeing the application for a Bitcoin-backed loan on such a scale. For the loan, Microstrategy had to agree on a common custodian with Silvergate Bank to store the required Bitcoins. It is an interest-only term loan which means the principal amount stays unchanged during the loan period, and the borrower pays only the interest.
The loan terms and conditions say that the company can buy Bitcoins with it, pay fees, expenses, or interest related to the loan or use it for corporate purposes. Let’s see when does Microstrategy announces their next purchase; I am optimistic it will be really soon.
Silvergate bank’s Bitcoin-backed loan
To provide the loan, the bank used their Silvergate Exchnage Network (SEN), which was launched in 2020 to provide loans backed by Bitcoins. Michael Saylor said that the option gave them a chance to increase their position in Bitcoin as investors. And the company is also able to use its Bitcoins without selling them, which is the trick.
Microstrategy might use the loan for business purposes as well. This is because they have always been wary about keeping cash. The company’s strategy is to acquire more BTC when they have excess cash flow. So, there is a chance that they didn’t have funds for their business due to poor cash flow. Still, I hope they use atleast some of it to get more Bitcoins.
The benefit of a Bitcoin-backed loan is that borrowers won’t have to miss out on the gains of BTC. If they would have sold their holdings, the case would have been different. Do you think it is a good idea as Microstrategy takes $205 million in BTC-backed loans? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.
Also Read: Coinbase is buying the parent company of Mercado Bitcoin for $2.2 billion.
